Waxman-Markey Property Rights to the Sky ? Part 3 Interview with Economist James Quilligan

08/07/2009 05:12 am ETUpdated
May 25, 2011

This is the final interview in a 3 part series with Economist James Quilligan.

Christiana Wyly: Considering your positioning as a global economist working on both environmentally and economically sustainable policy solutions, what do you think of the new Waxman-Markey cap and trade bill?

James Quilligan: There is not space here to examine all the flaws in Waxman-Markey, which can be readily found in commentary elsewhere. To me, the most objectionable thing is that this legislation represents an abiding commitment to neo-liberal economic policies for decades into the future. While the atmosphere currently has no propertied boundaries -- just as our lands and seas and spectrum had no legal boundaries centuries ago -- the Waxman-Markey bill effectively gives corporations long-term property rights to the sky through privately held carbon emissions permits. Once again, another part of our commons -- the air we breathe -- is being parceled into discrete units of economic value for a favored group without returning value to the actual stakeholders of the resource -- all of us.

We The People should not be allowing our government to give away -- totally free -- 85% of these carbon emission permits to corporations which will be used as virtual money and traded like derivatives. After all the financial crimes that have recently come to light on Wall Street, are we now going to let the fate of our planet's climate system rest in the invisible hand of this 'self-regulating' market? That is market ideology gone wild -- enormous windfalls for select businesses and a major erosion of equity and quality of life for everyone else.

It's not just a question of entitlement and social justice, but of our essential relationship with nature. Cap and trade is an epistemological mistake of a very high order: a presumption that the price system and market forces have greater collective intelligence than the biosphere itself. Have we actually forgotten that the air can exist without us, but that we can't exist without air? Human beings are living in world time; we need to start managing the planet by creating a new ontological dynamic among all of Earth's sovereign stakeholders.

Instead of granting carbon emission rights to corporations, government should be assigning the rights of the sky to a commons trust representing all of us. The trust would establish collective governance of the atmosphere, creating a cap on carbon emissions and renting the emissions rights to industries that want to emit carbon dioxide. The revenues from these rents would then go back into the trust and be invested in clean fuel and technology and also dispersed as dividends to the stakeholders of the trust -- which is everyone. This allows the shared responsibility and decision-making of people all over the world to be expressed directly in reversing climate change -- a collective wisdom far greater than that of the marketplace.

CW: The Marketplace and/or the Government I presume? At first glance, your assertion is similar in theory to Peter Barnes' concepts on Cap and Dividend. It seems that if we the global citizens are suffering the consequences of negative externalities such as air, water and soil pollution, that we should also be compensated for the use or depletion of our shared resources. How do we create such a structure in a scalable way? Can you speak more about building this common sector?

JQ: I'm very impressed with Peter Barnes' work, but since it's locale- and nation-specific, it doesn't scale up to the global level, as you say. That's largely because there is no current framework for sponsoring or implementing such measures globally. The United Nations has been working for decades on proposals known as 'alternative multilateral financing for development'. This involves cross-border commons that could be tapped to generate funds for international development and, in my view, could also be a basis for commons depletion and replenishment rents. These potential revenue sources include carbon dioxide pollution, international investment, foreign exchange, global trade, international jet fuel, maritime freight, ocean fishing, wildlife, forests, land, aquifers, surface water, minerals, seabed mining, energy consumption, hydrocarbons and exhaustible resources, satellite parking spaces, electromagnetic spectrum, advertising, patents, copyrights, internet and genetics.

We are recognizing that our shared spaces and resources generate their own value which must be maintained and replenished. And because they are commons goods -- not public or private goods -- responsibility for these cross-border resources must be undertaken through the self-organization and collective action of individuals, civil society and supra-national organizations. As citizens -- regardless of our sovereign obligations or commercial loyalties -- we must speak collectively for our region on matters concerning the welfare of our people when it's clear that threats like climate change, energy insecurity, unpayable debt or mass poverty are profoundly affecting the ability of our commons to sustain our livelihood and well-being.

Unlike the world's public and private sectors, commoners have deep experience in the safekeeping and supervision of these living systems, both locally and transnationally. Individuals across the world could organize trusts to govern the various commons -- for example, a sky trust like Barnes suggests, water trusts or copyright trusts. Commoners would share responsibility for the decision-making and preservation of the designated resource and there would be fair access to that commons for members of the resource community. Credit would remain within each commons area and be non-monetized to the extent possible; that is, people would trade this resource without converting it into money. But other credits for the extraction or use of the resource could also be monetized in the marketplace through rents to the private users or commercial providers of that resource. This would generate revenues which would go back into the replenishment of the commons and also create a dividend for people who are affected by the use or depletion of the particular resource.

CW: But how do we deal with the conflicts of interest -- that on one hand we need to support the economic development of the world's most impoverished communities, and on the other -- we need to protect those very resources -- air, water, soil, forests, oceans -- in order to ensure the long-term survivability of those communities? Is there a road forward for sustainable development?

JQ: The conflicts of interest you mention will continue to intensify until we reconceive and recalibrate the vital links between development, energy, environment and economics on the planet. I do believe there is a robust path to sustainable development, but it's not what mainstream politicians and experts are presently envisioning. Let me explain.

Many people are now acknowledging the need to internalize the external costs of environmental degradation and climate change into the market system by setting a real price on carbon emissions -- whether through cap and trade or a carbon tax. The triple bottom line of 'people, planet, profit' proposes that tackling our social, ecological and energy problems will create a massive stimulus for business and jobs through pollution cleanup, market-driven innovation, efficient use of energy and the development of clean technology. The goal is that as consumers and businesses are forced to adjust their practices and lifestyles by reducing their oil consumption, and businesses find that investing in efficiency or alternative energy is cost-effective, they will absorb most of the new environmental costs through higher prices.

But let's also remember that because oil is priced primarily in dollars across the world and has more direct influence on the value of currency than any other factor; the United States dollar is fundamentally linked to global crude oil as its de facto reserve base. So when it sets interest rates, the US Federal Reserve is actually reacting to relative price stability -- inflation or deflation -- largely caused by the global reserve and flow of petroleum as it affects US and global economic output and growth. Thus, it is the oil-driven engine of productivity in relation to the global oil reserve that the Federal Reserve uses to determine the value of its currency and, by virtue of US dollar hegemony, the world's currencies.

So, let's say we begin today to de-carbonize the global economy by increasing the price of carbon-based energy, reducing our demand for oil, developing alternative fuels and achieving energy efficiency through technological advances. Even if every business and every person in the world were to adopt clean and renewable sources of energy right at this moment, petroleum will remain the most important ingredient of economic growth, and the profit and wage incentives in these 'green' enterprises will still be denominated in dollar values that are linked directly to oil. So that's why I say that our current green stimulus plans are in fundamental conflict with the existing monetary system.

Simply greening all of the world's businesses and our consumer habits through the economic signals of the marketplace will not change the energy base of civilization from fossil fuel to solar or zero-point or other renewable energies as long as the reserve standard of the dominant global currency remains tied to fossil fuels.

CW:That does seem like a gigantic train wreck in the making. What I hear you saying is that we cannot transform our energy base from fossil fuel to alternative energies through market prices and incentives alone -- that there is a deep connection between sustainable development and the value of money?

JQ: Right. Sooner or later, the external costs of global poverty, climate change and geopolitical security must be adjusted not only through global market prices, but also through an adjustment of the world reserve currency system. The day is fast approaching when the US will be forced to negotiate the terms of a new global monetary system with China and other nations, almost certainly ending the currency link with fossil fuels. Then the big question is, what will the new reserve base be? Everyone has a different opinion on this. Here's mine: ultimately, global currency value should be determined by the priority and sustainability of global energy resources as commons reserves -- not by their price in the marketplace based on economic productivity and growth.

After all, the commons -- our environmental, social, cultural, genetic and intellectual resources -- is the stock from which all wealth grows. Because these resources provide the basic support systems of life, neither the market nor the state is sustainable in the long run without them. We know that if we extract resources at a rate beyond the level of their replenishment -- ignoring nature's vital role in producing the food, the water, the oil, gas and minerals, the fibers in our clothing, the materials of our houses and the medicines for our health that are so essential to our lives -- our commons will collapse. At the same time, the government's green stimulus packages are promising that if we just keep on increasing our exponential indebtedness to nature, we will find a way to pay it all back and everything will even out in the end. The lesson that we should be learning from the global financial crisis is that we cannot borrow ourselves into wealth -- including our deficit spending to pay for a Green New Deal.

Don't get me wrong -- I'm completely for greening the planet. But I believe that we can only make this adjustment by valuing our commons in real time -- by realizing the extent to which we are borrowing from the natural world without paying it back. Fundamentally, it's a question of attuning our economic relationships to the collective presence of 6.7 billion people and the carrying capacity of the planet to sustain them. The stock of planetary capital must be shifted to a rate of growth and development that the planetary commons can support. That's the only way we are going to have the perspective needed to make the Great Adjustment from energy dependence to energy intra-dependence, from a fossil fuel civilization to a solar or zero-point energy civilization, from a deficit-based economy to an asset-based system yielding new forms of natural and social equity, and from a world of poverty to a world of prosperity and peace.

CW:Thank You for your time James. Your ideas are thought provoking and your vision is inspiring.